Industry News
Toyota’s UK employees face recall fallout (Financial Times)
16th Febuary 2010
The furore surrounding Toyota’s product recalls has added to the woes of the Japanese carmaker in the UK, where it employs about 10,000 people directly or through its dealer network.
Toyota’s Burnaston plant in Derbyshire was already considering cutting 750 jobs in response to falling demand for cars. It may have to slash the headcount further if concerns over potentially dangerous accelerator pedals translate into significantly lower sales. Orders from UK customers have already fallen 7 per cent, the company said.
EDITOR’S CHOICE
In depth: Toyota - Feb-05David Pilling: Toyota engineered its downfall - Feb-10Toyota aims to beat out dents in its image - Feb-09Toyota chief reassures US consumers - Feb-09Patent dispute adds to Toyota’s woes - Feb-08Toyota to recall Prius hybrid in Japan - Feb-07David Bailey, an automotive expert at Coventry University, said: “[Toyota] has built its brand around reliability, so it is hardly surprising that it now has a problem.”
But Garel Rhys of Cardiff Business School said if the recall was executed with efficiency and attention to customer service, “this episode could be forgotten in 18 months”. He added: “Toyota has built up a lot of goodwill over 50 years and it can stand bad news like this, if only for a while.”
Toyota GB, the sales and marketing arm of the company, said its focus was on remedying the accelerator pedal fault in 180,000 UK vehicles, including the Avensis and the Auris manufactured at Burnaston. More than 8,000 Prius hybrids are meanwhile subject to “customer service action”, an intervention below a full safety recall, to fix a braking system fault.
Jon Williams, commercial director of Toyota GB, said: “The key thing for the brand is encouraging advocacy and word-of-mouth recommendations from customers.” He said mechanics among the 5,500 staff at Toyota’s 182 dealers and 206 service outlets were working evenings and weekends to fix faulty pedals. Toyota aims to complete the recall in six to eight weeks, depending on the availability of cars whose owners may be out of the country.
Miguel Fonseca, managing director of Toyota GB, based in Epsom, has apologised to customers in a video on the company’s website. Toyota is also considering increasing its UK advertising spend to help bolster its brand.
The suspect pedals were made by CTS, a US company. A CTS subsidiary at Blantyre in Scotland supplies the pedals to the Burnaston plant. However, Mr Williams did not seek to blame CTS, saying: “Toyota owns the engineering and signs off on the quality of these components.”
The recall looks set to dent Toyota’s sales just as they were showing signs of post-recession recovery. Sales of the brand, which ranks fourth in the UK with a 5 per cent market share, fell 12 per cent year-on-year this January to 7,346 although Toyota said this reflected strong sales last January. Annual figures from the Society of Motor Manufacturers and Traders show a steady decline from 118,493 units in 2007 to 102,612 units in 2009.
About 30 per cent of Toyota cars sold in the UK are made in Burnaston, many with engines manufactured at a sister plant at Deeside in north Wales. The effect of slumping car sales in Britain and other European markets supplied by the factories is clear from the Companies House filings of Toyota Motor Manufacturing UK.
In the year to March 31 2007 the company made a pre-tax profit of £12m on sales of £2.6bn. In the year to March 31 2009 the business chalked up a £192m loss on turnover of £2bn.
Professor Bailey said: “Burnaston is a world-class factory and a key business in the supply chain in Derbyshire. It shows the positive side of foreign direct investment into the UK.”
Toyota has spent about £1.15bn ($1.8bn) on the assembly plant and £700m on the engines business, which both began production in December 1992.
Tony Walker, deputy managing director at Burnaston, said managers would study the impact of the recall on sales to gauge whether to cut production schedules. This year was already promising to be a tough one as a result of the ending of scrappage schemes in the factory’s key European market. One positive development is that Burnaston will start making a hybrid version of the Auris in the autumn.
The factory’s production has fallen from 288,000 vehicles in calendar 2007 to 127,000 in 2009. The workforce has declined from 3,800 to 3,500. Last year, Toyota, in collaboration with labour unions, instituted a “worksharing” scheme under which pay and hours were reduced by 10 per cent. However, Toyota Motor Manufacturing UK is now seeking further cuts. “We have to make ourselves cost effective and productive for the long term,” Mr Walker said.
The company plans to close one of its two production lines in August, on the basis that a single line can produce up to 170,000 vehicles a year. As a result there will be “slack” of 750 staff in the headcount, equivalent to £25m a year. Two weeks ago Toyota began negotiations with unions on eliminating this cost through voluntary redundancies, an extension of worksharing, or a combination of the two.
This is a difficult time for Toyota’s UK employees and suppliers. Rides in the Burnaston factory on an electric train were once popular with fans of the carmaker’s “zero-defect” production system. It is hard to imagine there will be many takers until memories of the recall have faded. But previous product safety scares involving companies such as Cadbury and Mattel show that consumers can be more forgiving than the media coverage of brand owners would suggest.
News Headlines
